How to Prevent and/or Survive a Warranty Audit

1 How to Prevent and/orSurvive a Warranty AuditWithRob CampbellEditor, DealersEdgePresented by- 2 - How to Prevent and/or Survive a Warranty Audit INTRODUCTIONS Hi, I am Rob Campbell As we begin: As soon as we begin to think of Warranty administration as a person in a chair, we ve doomed the shop to eventual failure. Warranty operations in a dealership should be a systematic approach to payment. Factory Trend and Expense reporting The dealership s periodic expense report - We have found that in most cases the factory has at least a reason to be suspicious and the excessive expense is out of the ordinary.

2 _____ _____ _____ _____ Audit avoidance Most manufacturers have a defined risk criteria on who to select based on the dealership s Warranty performance. (WARNING: DANGER! WILL ROBINSON) Look at their overall CPVS and categories (repair groups and expense areas) How to find your own answers in your expense reports Two factors influence CPVS o Cost per repair o Frequency of repairs Cost influences Parts Sublet/Dealer Material/Net Labor Hours Straight-time/excessive hours _____ _____ _____ _____ Frequency influences Visits (potential comebacks) Repairs per visit (add-ons or pyramids/multiple repairs) _____ _____ _____ _____ - 3 - Conducting an investigation (whether on your own or a self- Audit from the manufacturer)

3 Reacting to a self- Audit from the factory Keep an open mind as to what the problems can be Highly recommend you (or have someone else) research technical information Factory tools and help getting rep involved Dealer generated reports (Contact the dealership s vendor) _____ _____ _____ Look for the "root" cause, as well as policy errors Root cause can almost always be seen as trends (in advisor, technician, type of vehicle, type of repair) Be warned of typical "knee-jerk" excuses _____ _____ _____ Struggling for Compliance If the basic rules haven t changed in 15-20 years, why do some shops continually struggle with maintaining compliance?

4 Some concentrate on the letter of the law, and not the spirit. You need to have both. Practical level of compliance and raising the bar. Constant coaching is key Bad habits start very subtly and begin to grow. Thirteen Warranty Rules the common policies of documentation 1. Accurate and complete information: GIGO (garbage in, garbage out) Delivery date, repair date and mileage Customer acknowledging complaints Clear understanding of charges -- who's paying _____ _____ _____ _____ _____ _____ - 4 - 2. Accurate and complete customer concern descriptions No SOP, parts in, or other jargon plain English Maintenance vs.

5 Warranty Shop needs to restate the customer's complaint into a "warrantable defect" Using the seven dirty words you can t use on a Warranty claim (or at least shouldn t) o Broken, bent, cut, punctured, dented, torn, and bad _____ _____ _____ _____ 3. Determination of Warranty eligibility Comebacks is the most missed item here Advisors must acknowledge return exists - if not the claim will be questioned Address these points (same complaint? Did previous repair fix it? When did it reoccur?) Line by line, case by case determination of Warranty _____ _____ _____ _____ How to judge our dealership performance: Mileage ending in 00 from any claim listing Rejects for beyond Warranty Chargebacks for not Warranty from parts return centers or after a parts scrap Improving your dealership Advisors write, technicians verify, booker inspects, Warranty administration assures 4.

6 A complete description of the cause of failure Technician documentation is key Were the proper repair/diagnosis procedures performed? Look for areas where the technician s comments are not accurately transferred. _____ _____ _____ _____ - 5 - 5. A reasonable correction for the failure Repair vs. replace Does the repair match the complaint? _____ _____ _____ _____ 6. Time recording Time recording has been a favorite target area Technician efficiency -- impossible thresholds Approve and record additional time _____ _____ _____ How to judge our dealership performance: Watch time records for breaks, normal work stops, etc.

7 Extreme efficiency or inefficiency Lack of test results, measurements, comments Improving your dealership Constantly reinforce the tech s role and duties regarding Warranty . Develop quick sheets and notes to assist techs in noting the correct documentation. 7. Approval required for additional work (Add-on's) You must fulfill requirements, plus not be soliciting repairs Who benefited the most? Controlling multiple repairs _____ _____ _____ 8. Proper documentation and retention of Warranty parts. Return of parts when requested and tracking those returns Caution against shops allowing parts to accumulate in the shop area All parts need to be retained _____ _____ _____ - 6 - 9.

8 Accurate sublet charges and receipts Watch excessive sublets for kickbacks, tightly control 's Audits have shown increased interest in sublet invoices they are looking for billing differences between Warranty and "standard" _____ _____ _____ 10. Accurate labor operation numbers and times Overlapping operations Excessive repairs/diagnosis requested _____ _____ _____ _____ 11. Proper administration of Service management/factory approvals Sign, date & time, and explain any authorization Justify your decisions _____ _____ _____ _____ 12. Data entry must reflect what is on the Watch for changes between entries and the (DCS Audit or buck-slips) Be particularly concerned with the minor items (tech id#, etc.)

9 _____ _____ _____ _____ 13. Filing and record retention You must retain for most manufacturers for 12-24 months. Purge consistently Make sure there is easy access _____ _____ _____ _____ - 7 - CLOSING The last one out turns off the lights A Warranty claim is always at the mercy of whomever _____ it. - all the momentum at that point, when it goes into accounting, is to get paid for that amount. The most common mistakes made by booker/closing Lack of understanding of technician controls add-ons, straight-time, etc. Treats it like another piece of paper to get of their desk Untrained in the use of the factory s time standards Failure to recognize mistakes misbilled items, etc.

10 How to judge our dealership performance: We get rejects for seemingly simple clerical errors Warranty administrator / data entry is having to constantly ask for clarification The service manager never has to reconsider, approve or review a Warranty claim at this stage. Improving your dealership Quick checks using Wednesday, Thursday, Friday, Saturday technique W Warranty eligibility T Time billed and flagged F Facts to support S Signatures to control -- Covering the four basics each and every time assures consistent results Making sure of every dime is a combination of the first four key steps we ve discussed.